Expansion of the Business

The success of the booth soon supplied the funds and the basis for a larger and more convenient candy shop located near the arcade. This store, always conducted on the principle of giving value received, of always meeting the demands of its patrons, of being a little different from other stores, was as successful on a larger scale as the booth had been, and from that time on the Mary Elizabeth record is one of a successful undertaking.

The Mary Elizabeth business is now large and prosperous. Its candy stores and tea rooms are located in half a dozen different cities. The rental for one of these alone-the Fifth Avenue store in New York City-amounts to over $50,000 a year, and the annual "turnover" of the various establishments runs far up in the hundreds of thousands of dollars. Mary Elizabeth is still at the head of the establishment, and still conducts it on the same general lines laid down in the early history of the undertaking.

A Wrong Financial Plan

In striking contrast to this history of self-financing success is another instance known to the writer, but not to fame. Some years before Mary Elizabeth made her start, an inventive genius skilled in food preparations discovered a new and attractive preparation of chocolate-a soluble chocolate, different from anything else on the market at that time, convenient for use, and as good a foundation for a profitable business as could be desired. The inventor, through illness and attendant business reverses, was himself unable to put any large sum of money into the development of his invention, and the question of how it should be handled was the first consideration.

As will be seen, the prospective enterprise was one that lent itself admirably to the personal development plan. The few hundred dollars necessary for a modest start could have been provided by the owner himself; the expenses could have been met by the returns from the business; it would have become readily self

sustaining as it grew; and the presumption is a fair one that had the owner followed the method of self-development he would now be the possessor of a nation-wide and profitable business.

The owner of the enterprise, however, decided against the method of personal development. A quick and brilliant success was his ideal, and for this a considerable amount of ready capital was required. After due deliberation he fixed on $100,000 as the amount needed to put the preparation on the market. Then, instead of devoting his time and energy to the building of the business, he devoted himself to a campaign for money.

The results were most unfortunate. Begun over twenty years ago, the campaign continued up to a recent date. The time has been lost, the enterprise and its owner have been harassed by a steadily growing indebtedness, similar preparations have long since entered the market, and the inventor is now apparently further from the realization of his hopes than he was at the beginning.

It is but fair to say, however, that in this case the inventor lost several good opportunities of financing his undertaking, through unreasonable exactions. Also, had his proposition been reasonable, the funds required might have been secured and the business have reached substantial success in a very much shorter period than would have been possible under the slow method of personal development. Moreover, this quicker success would probably have created a monopoly that might not have been possible under a slower growth.

Side-Line Development

A modification of the personal development method, sometimes followed with excellent results, is the gradual up-building of a new enterprise as a side line, or as an incident of the main business. That is, the owner who is already occupied in his own business continues in the employment in which he is engaged and from which he derives at least a support, giving the new venture

only such time, attention, and money as he can spare from his other work.

It is obvious that the "side-line" method of business has limitations. The conditions that permit it are not frequently found. As a rule, success in any enterprise, and particularly in a new enterprise, requires the closest and most unremitting personal attention. There are, however, conditions under which it may be successfully employed and enterprises which may be worked up by this method, or by modifications of the method, to much advantage.

A Successful Side-Line Effort

A better example of side-line business building could hardly be found than the development of Montgomery Ward and Company of Chicago. Some fifty years ago Montgomery Ward was a clerk in a Chicago retail store. The store advertised special bargains from time to time in the local newspapers and, as usually happens, this brought in scattering mail orders. The store was not prepared to handle mail orders and found them a nuisance. At the same time it was deemed bad policy to decline to fill them. It might create ill-will. Finally, young Ward was told that if he would look after these orders and handle them satisfactorily he might have for his own any resulting profit.

Montgomery Ward was quick to see the unusual opening. Here was an opportunity to build a business with capital and trade both supplied, and without interference with his regular work. He accepted the proposition at once, took entire charge of the incoming mail orders, and handled them so well that there was a steady increase in the business, those who had bought once coming back time after time to buy again.

The profits were satisfactory, and it finally occurred to Ward that it might pay him to print circulars announcing forthcoming bargains and to send these circulars to his mailing list, composed of the names of those who had already sent in mail orders. The success of the plan was immediate and the results so good that

Montgomery Ward shortly left his position with the store, rented a room of his own, and entered the mail order business under the name Montgomery Ward and Company.

This was in 1872. During the early years of the business its growth was slow but gained momentum as time went on. In 1888 the business was incorporated and has since been conducted as a corporation. In 1919 the gross sales were over $100,000,000, with net profits in excess of $4,000,000. The gross sales in 1920 were even larger but, owing to excessive inventory depreciation, no profits were made.

Modifications of the Side-Line Plan

Various modifications of the side-line plan are found. Sometimes two parties are interested in an enterprise, the one taking charge of the new work while the other retains his regular employment to serve as a base of support, this latter giving to the new business such financial aid as his resources will permit and such personal attention as he may be able to divert from his regular occupation. Then, when the new enterprise is brought to the point of self-support, the "sustaining" associate, if he wishes, may safely withdraw from the old occupation, join his partner, and give his entire time and attention to the new business.

Occasionally this plan is varied, the owner employing someone to take charge of the new enterprise while he continues his regular work, merely supervising and assisting the new undertaking as he may be able. The chief obstacle here is the difficulty of securing employees of sufficient honesty and ability to take charge of the business. When an enterprise is in the "day of small things" and unable to pay attractive salaries, this difficulty is frequently insuperable.

Advantages and Limitations of Side-Line Development

When capital is limited, the advantages of side-line development-if at all practicable are obvious. In a new enterprise of

limited capital there is almost invariably a period of harassing uncertainty, sometimes quite prolonged, when outgo treads closely on the heels of income, and sometimes passes it, and the future of the whole venture trembles in the balance. If then the owner, or one of the owners, is profitably employed and able to supply additional funds as they are needed, the danger of failure is greatly lessened and the very knowledge that the "base of supplies" is not in danger is in itself an element of strength and of success.

On the other hand, while the side-line method of building up a business has its place and its advantages, it is, speaking generally, of very limited application. It can only be used under certain conditions and the development of a new enterprise by the method is ordinarily slow. Also the business so conducted is almost certain to suffer, and perhaps fail, from lack of attention, and there is the further danger that the demands of the new business may become so exacting as to take more time and attention than can be rightly spared from the old occupation. And, finally, it may be said that in practice most side-line attempts are either failures or only very moderate successes.

Borrowed Capital

Another method of financing a business frequently employed is to borrow the money required, in whole or in part. This is possible only where the personal standing or the collateral security of the borrower is such as to justify the loan, as it is seldom that a new enterprise is itself acceptable security for the money needed for its development.

If the enterprise itself is sound, if the owner or the party in charge is a good manager, and a loan can be obtained on fair terms either from friends, from the local bank, or in the form of a credit for goods, the plan of borrowing has material advantages. The greatest of these is found in the fact that the control and ownership of the new undertaking are left in the hands of the original party.